TY  - JOUR
AU  - Fishback,Price V.
AU  - Kantor,Shawn Everett
TI  - Insurance Rationing and the Origins of Workers' Compensation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4943
PY  - 1994
Y2  - December 1994
UR  - http://www.nber.org/papers/w4943
L1  - http://www.nber.org/papers/w4943.pdf
N1  - Author contact info:
Price V. Fishback
Department of Economics
University of Arizona
Tucson, AZ  85721
Tel: 520/621-4421
Fax: 520/621-8450
E-Mail: pfishback@eller.arizona.edu

Shawn E. Kantor
School of Social Sciences, Humanities and Arts
University of California, Merced
5200 N. Lake Road
Merced, CA 95343
Tel: 209-228-2956
Fax: 209-228-4007
E-Mail: skantor@ucmerced.edu
AB  - A central question concerning the economic motivation for the adoption of workers' compensation is the extent to which workers had access to their desired levels of private accident insurance around the turn of the century.  If insurance were rationed then workers' primary option would have been to use savings to protect against accident risk.  We develop a theoretical model that suggests that workers' compensation, under this market condition, should have caused a reduction in households' precautionary saving.  Our empirical test is based on a sample of over 7000 households surveyed for the 1917- 1919 Bureau of Labor Statistics Cost-of-Living study.  Regression analysis suggests that households tended to save less, holding all else constant, if their states had workers' compensation in force. This finding, in concert with qualitative information about the insurance industry, provides some evidence that insurance companies were unable to effectively offer workplace accident insurance to a wide range of workers.  By shifting the burden of insurance from workers to employers, workers' compensation benefitted risk-averse workers who were rationed out of the insurance market, even if they paid for their more generous post-accident benefits through lower wages.
ER  -